Question

Define bonds? Explain how bonds are priced. Be sure to provide an example of a bond.

Define bonds? Explain how bonds are priced. Be sure to provide an example of a bond.

Homework Answers

Answer #1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Bond is a fixed income security. It typically pays a Interest amount at regular intervals & Principal amount at last.

It can be broadly of 2 types: Government or

Corporate.

The price of bond = present value of all future cash flows discounted at yield to maturity.

Example:

A bond has face value of 1000,

Matures in 4 years.

Coupon rate = 7%

Yield to maturity = 9%

Price =

[70/(1.09)^1]+[70/(1.09)^2]+[70/(1.09)^3]+[1070/(1.09)^4]

= 935.21

Therefore, price of the bond is equal to $ 935.21

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
How is the interest rate of a bond determined? Explain and provide an example.
How is the interest rate of a bond determined? Explain and provide an example.
Define, or provide and example of, the mode of a distribution. Define, or provide and example...
Define, or provide and example of, the mode of a distribution. Define, or provide and example of, the mean of a distribution. Define, or provide and example of, the median of a distribution.
Define prejudice Define discrimination Give an example of prejudice Given an example of discrimination Explain how...
Define prejudice Define discrimination Give an example of prejudice Given an example of discrimination Explain how prejudice and discrimination gave rise to and perpetuate slaver
How do economists define a "bubble"? Provide an example of an asset market that you think...
How do economists define a "bubble"? Provide an example of an asset market that you think could be the next bubble and explain why. (Do not use the examples cited in your textbook).
Contrast in detail the following terms: Species evenness and species richness. A)Be sure to define each,...
Contrast in detail the following terms: Species evenness and species richness. A)Be sure to define each, B)then explain how they are different and similar, and C)provide a theoretically example of how they are used when describing a community.
Explain the differences between stocks and bonds. Be sure to include how stocks and bonds are...
Explain the differences between stocks and bonds. Be sure to include how stocks and bonds are carried on the books of the issuer and then of the buyer.
Define “unearned revenue.” Provide an example.
Define “unearned revenue.” Provide an example.
Using semiannual​ compounding, find the prices of the following​ bonds: a. A 10.21%,​15-year bond priced to...
Using semiannual​ compounding, find the prices of the following​ bonds: a. A 10.21%,​15-year bond priced to yield 7.9​%. b. A 7.3​%,10-year bond priced to yield 9.6​%. c. A 11.9​%,​20-year bond priced at 9.6​%. Repeat the problem using annual compounding. Then comment on the differences you found in the prices of the bonds
Define bottom-up and top-down processing. Provide an example for each, with a clear explanation of how...
Define bottom-up and top-down processing. Provide an example for each, with a clear explanation of how it’s an example of that type of processing.
There are three types of waves in physics. Define and explain what these are, and provide...
There are three types of waves in physics. Define and explain what these are, and provide an example of each one.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT